We’re past the halfway point of the year. For many charities and non-profits, that means annual reports feel like a distant memory. The next set of accounts feels far away and the finances are quietly ticking along in the background while everyone focuses on delivering services and supporting beneficiaries.
Not the amounts. The process.
Mid-Year Is The Perfect Time To Pause
Mid-year is actually the perfect moment to pause, take stock and make sure your organisation is on solid financial ground. Not a full audit, not an emergency intervention, just a structured check-in that gives your trustees, CEO, and finance team the confidence to carry on, or the early warning to course-correct.
For trustees, chief executives and finance leads, a mid-year review does not need to be complicated. It should answer three simple questions.
Are we broadly where we expected to be?
Are there any financial risks we need to deal with now?
What decisions do trustees need to make before year end?
This guide sets out the areas worth reviewing, with practical actions your charity can take before the summer months. If your organisation is also considering wider finance support, our article on financial support for charities explains why specialist charity accounting support matters.
1. Start With Actual Income Versus Budget
The first step is to compare actual income with the budget approved by trustees.
Look at each main income stream in turn. This might include grants, donations, fundraising events, trading income, service income, membership fees or contract income.
Ask:
Has income arrived when we expected it?
Are any grants delayed?
Have fundraising campaigns performed above or below target?
Are any funding decisions still outstanding?
Is any income unlikely to be received this year?
The important point is not just whether income is ahead or behind budget. Trustees also need to understand why.
For example, a fundraising event may have brought in less income than planned, but if the costs were also lower, the overall result may still be acceptable. On the other hand, a grant that has been confirmed but not yet paid could create a cash flow problem, even if the annual budget still looks achievable.
Have the grants you budgeted for actually been awarded? Are there any grant claims outstanding that need to be submitted? Late or missing income has a knock-on effect on cash flow even if the grant is technically secure. How is performance tracking against the same period last year?
Are there any one-off donations last year that inflated the comparison and won’t be repeated?
Mid Year Action
Prepare a short income summary for trustees showing:
Budgeted income to date
Actual income received
Difference in pounds and percentage terms
The reason for any major difference
Whether the annual forecast needs to change
2. Review Spending Before Small Issues Become Bigger Ones
Income often gets the most attention, but spending deserves the same level of review. Check whether expenditure is in line with the budget and whether any costs are rising faster than expected.
Look at:
Staff costs
Employer pension and National Insurance costs
Property and utility costs
Project delivery costs
Insurance
Professional fees
Software and subscriptions
Fundraising costs
Any one off or unexpected costs
A small overspend in one area may not be a concern. Several small overspends across the organisation can quickly reduce unrestricted reserves.
This is also a good time to check whether expenditure is being coded correctly. If costs have been posted to the wrong project, fund or budget line, the management accounts may be giving trustees an unclear picture.
Unclear records, delayed reporting and confusion over funds are common causes of finance chaos in charities, so it is worth dealing with small process issues before they become harder to untangle.
Mid Year Action
Review all budget lines with a significant overspend. For each one, record:
The reason for the overspend
Whether it is temporary or likely to continue
Whether the forecast should be updated
Whether trustee approval is needed for any change in plans
3. Check Restricted Fund Balances Carefully
This is an area where charities can get into difficulty without realising it. Restricted funds (money given by a donor or funder for a specific purpose) cannot be used for general running costs. If you spend restricted funds on the wrong things, even inadvertently, it can create a legal and reputational problem.
A charity can have a healthy bank balance and still be under pressure if much of that money can only be used for specific projects or purposes.
At the mid year point, review each restricted fund and check:
What the funding can be used for
How much income has been received
How much has been spent
Whether spending is in line with the funder’s conditions
Whether any underspend may need to be returned
Whether any costs have been charged to the wrong fund
One common problem is assuming that all cash in the bank is available for general running costs. It may not be. Some of that money may be held for a specific project, location, activity or beneficiary group.
Understanding the difference between restricted and unrestricted funds is essential, because trustees need to know how much money is genuinely available for core running costs.
If any restricted funds are unspent and their spend deadline is approaching, that should be flagged now and not in October when it’s becoming urgent.
Mid Year Action
Prepare a restricted funds schedule showing:
Opening balance
Income received
Expenditure charged
Closing balance
Remaining obligations
Any reporting deadlines or funder conditions
4. Update Your Cash Flow Forecast
Profit and loss accounts tell you whether you’re financially sustainable. Cash flow tells you whether you can pay the bills next month.
An organisation can show a surplus on its accounts while struggling to meet payroll, simply because income is arriving in lumps (a grant paid quarterly, for example) while costs go out every month.
A basic cash flow forecast for the next three to six months is one of the most valuable tools a charity finance team can produce. It doesn’t need to be elaborate. A simple month-by-month projection of expected income in and costs out, with a running balance, is enough to spot any pinch points before they become crises.
Your cash flow forecast should look ahead on a month by month basis and show whether the charity has enough cash available to meet its commitments.
Include:
Expected grant receipts
Regular donations
Fundraising income
Payroll
Rent and property costs
Supplier payments
Project costs
Loan repayments if applicable
Tax and pension payments
Any large planned purchases
The summer period can be a particular pressure point for some charities if fundraising slows, decision makers are on leave, or payments from funders take longer than expected.
Good cash flow forecasting helps trustees see pressure points early, rather than reacting once cash is already tight.
Mid Year Action
Prepare a cash flow forecast covering at least the next three to six months.
Highlight any month where cash looks tight and agree what action should be taken.
This might include chasing grant payments, reviewing spending plans, delaying non essential costs or speaking to funders about payment timing.
5. Review Free Reserves Against Your Policy
Reserves are not just an accounting figure. They are part of how trustees manage risk.
The Charity Commission expects trustees to decide, publish, implement and monitor their charity’s reserves policy. The policy should be specific to the charity and should reflect its activities, risks, future plans and financial commitments.
At mid year, trustees should compare the charity’s current free reserves position with the agreed reserves policy.
Ask:
What are our current unrestricted reserves?
Have any unrestricted funds been designated for a specific purpose?
What are our free reserves?
Are free reserves above or below the target range?
Has anything changed that affects the reserves policy?
Do trustees need to take action?
If reserves are below target, trustees should understand the reason and consider whether spending plans need to change. If reserves are above target, trustees may need to consider whether there is a clear reason for holding that level of funds, or whether some funds could be used to further the charity’s purposes.
Reserves also link closely to wider charity reporting. Our article on SORP 2026 charity reporting changes explains some of the areas charities should be paying attention to as reporting requirements develop.
Mid Year Action
Include a simple reserves calculation in the finance report to trustees.
Show the current position, the target set out in the reserves policy, and any recommended action.
6. Look at Funding Risk
Many charities rely on a small number of funders or income streams.
That can create risk, especially if a major grant is due to end, a contract is up for renewal, or a fundraising campaign has not performed as expected.
A mid-year review is a good time to look ahead and ask how secure the charity’s income is for the next six to twelve months.
Consider:
Which funders provide the largest share of income?
Are any grants ending soon?
Are any applications still awaiting decisions?
Are any contracts being retendered?
Are funder reporting requirements up to date?
Do we have enough unrestricted income to support core costs?
What would happen if a major income source was delayed or lost?
This does not need to become a lengthy risk exercise. The aim is to identify the funding issues that could affect service delivery, staffing or cash flow.
Mid Year Action
List your largest income sources and note any renewal dates, reporting deadlines or known risks.
Where there is a potential gap, agree who is responsible for the next step and when it will be reviewed.
7. Check Internal Financial Controls
Trustees need confidence that the charity’s money is being properly managed and protected.
The Charity Commission’s guidance on internal financial controls explains that suitable controls help charities manage financial risk, keep good accounting records, prepare timely financial information and comply with legal reporting requirements.
At mid year, it is worth checking whether basic controls are working as intended.
Ask:
Are bank reconciliations up to date?
Are invoices approved before payment?
Are expenses supported by receipts?
Are restricted funds being tracked separately?
Are payroll changes properly authorised?
Are trustee approvals documented?
Is financial information being reviewed regularly?
Are there any gaps caused by staff leave or changes in responsibility?
This is especially important before the summer, when staff absence can make processes less consistent.
Charities should also think about fraud, scams and payment security. Our guidance on protecting your organisation against scams includes practical reminders that are relevant to any organisation handling payments, supplier details and financial data.
Mid Year Action
Review your finance procedures and identify any weak points.
Focus on practical improvements, such as clearer approval limits, better documentation, regular reconciliations and more timely management accounts.
8. Give Trustees a Clear Finance Report
Trustees do not need pages of unnecessary detail. They need clear information that helps them make good decisions.
A useful mid year finance report should show:
Actual income and expenditure compared with budget
Updated year end forecast
Cash flow forecast
Restricted fund balances
Free reserves position
Key risks
Decisions needed from trustees
The report should also explain any major variances in plain English.
For example, instead of saying that project expenditure is adverse to budget, explain that project costs are higher than expected because supplier prices have increased, or because activity has taken place earlier than planned.
Clear reporting is also a sign that the charity has good financial processes behind the scenes. If your accounts are difficult to interpret, or if trustees are not receiving timely information, it may be time to review the finance systems, reporting format and division of responsibilities.
Mid Year Action
Create a one page finance summary to sit alongside the management accounts.
Use it to draw attention to the most important points, rather than expecting trustees to find them in the detail.
A Practical Checklist for Charity Leaders
Before the summer period, your charity should be able to answer these questions.
Is income in line with the budget?
Are any grants, donations or contracts delayed?
Is spending under control?
Are restricted funds being tracked correctly?
Do we know how much unrestricted cash is available?
Is our cash flow forecast up to date?
Are free reserves in line with our reserves policy?
Are there any funding risks in the next twelve months?
Are financial controls working properly?
Do trustees have the information they need?
If the answer to any of these questions is unclear, now is the time to investigate.
Final Thoughts
Charities do extraordinary work under significant financial pressure. The people leading them are often more focused on mission than money, which is entirely understandable.
But good financial stewardship isn’t separate from your mission. It’s what makes your mission sustainable. A mid-year financial check-up is one of the simplest, most effective things you can do to protect the services you deliver and the people who depend on them.
If you’d like support with your mid-year review, whether that’s preparing management accounts, reviewing your reserves policy, or helping trustees understand what the numbers mean, Profectus Accounting works with charities and non-profits to make financial management clearer and less stressful.
Get in touch to find out how we can help. Contact us by phone or email here or book in a free finance fix call to learn more.
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